This is a contributed article by Pastenieks, Bucheli & Falasco, LLP. They prepared this material for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal and accounting advice. You should consult your own tax, legal and accounting advisors.
Dumpling Business Owner Year End Tax Tips
As a business owner working with Dumpling, you will probably be filing your taxes as a self-employed individual. For some of you, this may be the first year working with Dumpling and you may need some tips on how to proceed with compiling the tax information for the 2020 tax return. This year, Dumpling wanted to put together some helpful hints to assist you. As a business owner, you will receive a year end statement for 2020 from Dumpling that will summarize your gross income, deductions, and the net monies that you earned for the year.
Below is a snapshot of what is detailed on the Dumpling statement.
Total Invoices: $25,000.12 (Total invoice charges to clients, including groceries, shopping & delivery, gratuity, adjustments, and Dumpling platform fees)
Groceries and Fees: $15,000.45 (Total cost of groceries, Dumpling platform & processing fees)
Net Earnings: $9,999.67 (Total payouts to you designated bank account in 2020)
Total Transactions: 225 (Total number of transactions processed with Dumpling in 2020)
Tax Forms: 1099-K mailed (Gross payments must exceed $20,000 and exceed 200 transactions)
If the form Schedule C applies to your tax filing, the following explains how to report the activity. Generally, if you are a sole proprietor, you will be filing this form for 2020.
Total invoices are reported on Part 1, line 1 of the form Schedule C.
Groceries and fees should be included on Part V as other expenses.
Additional expenses incurred outside of those listed above are reported on the appropriate lines of the Schedule C such as advertising, office expense, etc. We have included a link to the 2020 form Schedule C for your reference.
What are those additional expenses that you might have as a Dumpling business owner? We have included the major expenses that come to mind for the delivery service business. This is not an all-inclusive list. There may be some expenses not detailed that may still apply to your individual situation.
Vehicle expenses are the most common for your industry. These can be deducted using one of two methods. (a) The standard mileage rate (calculated by multiplying $0.575 per mile in 2020). (Example: If you drove 1,000 miles for business, your deduction would be $575). This would include only business mileage. This might be your preferred method if you have not maintained documentation for your actual out of pocket expenses for 2020. These miles would include picking up a delivery and any mileage between a delivery and the next pick up. Commuting mileage does not count. For future reference, it would be highly suggested that a daily mileage log is maintained for your records and audit purposes. (b) Actual expenses which would include gas, repairs, insurance and DMV fees. These would have to be substantiated by receipts. A percentage of business use must be determined. (Example: If you have $2,000 in actual expenses and use your vehicle 80% your deduction would be $1,600). Total auto expenses would be included on line 9 of the form Schedule C.
Cell phone charges and accessories (make sure you can support the business use of your cell phone). This expense would be reported on Part V as other expenses.
Business taxes and licenses. This expense would be reported on line 23 of the form Schedule C.
Parking, highway and bridge tolls. This expense would be reported on Part V as other expenses.
Personal protective equipment used during the time spent shopping and delivering groceries to your client. This expense would be reported on Part V as other expenses.
Insulated bags/blankets for storage of groceries for clients. This expense would be reported on Part V as other expenses.
Advertising and marketing to develop client relationships. This can include business cards, car wraps, and promotional materials. This expense should be reported on line 8 of the form Schedule C.
Dumpling monthly subscriptions fees, software licenses and subscriptions. This expense would be reported on Part V as other expenses.
All of the above expenses must be substantiated with receipts.
There are apps that can help you track your business miles as well as your expenses to make tax time more efficient. Examples of these include but are not limited to Quickbooks, Everlance, MileIQ, Stride Tax and Shoeboxed. It is also important to have a business checking account so that personal and business activity is separated and there is a clear audit trail.
Please do not hesitate to contact us if you have any questions.
Disclaimer: Pastenieks, Bucheli & Falasco, LLP has prepared this material for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal and accounting advice. You should consult your own tax, legal and accounting advisors.
Pastenieks, Bucheli & Falasco, LLP
1301 L St., Modesto, CA 95354 / 1214 West F St. Ste B 205, Oakdale, CA 95361
ph 209.529.5515 fax 209.554.0301 / ph 209.845.1040